Telecom stocks in focus after Cabinet approves spectrum auction

(Image: Reuters)

Telecom stocks are in the focus today after Union Cabinet, on December 16, approved the auction of 2,251 megahertz of spectrum by the end of FY2020-21, Telecom Minister Ravi Shankar Prasad said.

“In total 2,251 mhz will be put for auction. We will be auctioning spectrum in the 700, 800, 900, 1800, 2100, 2300 and 2500 mhz bands,” Prasad said at a media briefing.

“This month itself we will issue notices inviting applications, and the auction will be carried out in March,” Prasad said.

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In the Union Budget 2020-21, the government had targeted a revenue of Rs 1.33 lakh crore from telecommunication services, which includes spectrum auction proceeds, licensing fees and other receipts. In 2019-20, the centre received Rs 58,990 crore in telecommunication revenues, versus a budgeted target of Rs 50,520.

Motilal Oswal

The auction would cater largely to the renewal of expiring spectrum coming up in FY22, along with fresh spectrum in the remaining bands. BHARTI/VIL/RJio would require capex of Rs 130b/Rs 83b/Rs 280b at reserve price to renew their expiring spectrum. Furthermore, telcos would need to furnish additional capex to buy fresh spectrum.

Similar to previous auctions, telcos would have the option to pay a 25% upfront price for the 700MHz, 800MHz, and 900MHz bands and a 50% upfront price for the rest of the bands. The remaining amount would be payable in installments over 16 years post a two-year moratorium.